by
Mark Leno
on
January 31, 2005

Now that Governor Schwarzenegger has delivered his 2005-06 budget, Californians will have the opportunity to consider his proposals and determine if they accomplish that which the governor had promised during his campaign for office and statements he has made since taking his oath. Among his more familiar mantras is his opposition to higher taxes and to more state borrowing.

The governor has been very clear in his assessment of our ongoing budget crisis. It is his determination that the state is suffering from a spending problem, not a revenue problem. If that is the case, the solution should be quite simple – cut spending. But what would it take to close a $9.1 billion gap through spending cuts alone? If we were to fire every state employee we would save approximately $8 billion in general fund salary expenditures. If we were to completely dismantle the University of California and California State University systems, the annual savings would be about $5.4 billion. Eliminate our Youth and Adult Corrections Agency thereby closing every state prison? Savings – $7 billion.

Clearly, if we were to balance our budget through cuts alone, we would do serious damage to our state’s basic infrastructure at a time when we should be reinvesting in it in preparation for the historic population surge we will experience in the next twenty years. Just as clearly, the governor knows that cuts alone cannot be the solution. That is why borrowing, which comprised 40% of his solution to the shortfall in the current fiscal year’s budget, is growing to over 60% in his proposal for the coming year. This is in spite of his famous recall campaign pledge, “I promise you as governor I will not spend more money than the state takes in” (to Fox News’ Bill O’Reilly, September 10, 2003) or during the Proposition 57 and 58 campaigns, “We will.cut up the credit cards and throw them away.” (Associated Press, February 6, 2004).

Of course, borrowing comes with its own price tag. Should the governor have his way, the cost of our debt service will increase from nearly $2 billion in the 2005-06 budget to approximately $4 billion in each of the next three consecutive years. That means we will be budgeting more for the cost of our governor’s new debt than for Supplemental Security Insurance (SSI) for aged, blind and disabled Californians, more than for our community college system, our UC system, our CSU system and more than for CalWORKS, our welfare to work program.

So if the governor cannot resolve our “spending problem” through cuts alone and now in his second budget must again rely upon historic levels of new borrowing in spite of his repeated promises not to, is it possible that his premise is faulty? Might we have a revenue problem? Without considering any new taxes but merely returning to the tax revenue sources the state had in place until the end of the last decade, the budget deficit would evaporate. If the Vehicle License Fee (VLF) had not been suspended by the legislature in 1998 and rescinded by Governor Schwarzenegger on his first day in office, the state would have benefited by approximately $4 billion each of those years totaling $30 billion to date. The cut in the VLF saved the average car owner about $200 annually, an amount she/he paid every year since 1948. If the top 2% of California’s tax payers were paying the same rate in state income tax that Governor Pete Wilson established in the early 1990s, the state would be receiving an additional $3 billion each year. If the governor were to direct his energies toward closing corporate tax loopholes and ensuring better collection of existing tax revenues owed the state we would have another billion dollars or more to close the gap.

Congresswoman Zoe Lofgren has identified tens of billions of federal dollars owed to California (our tax payers send Washington a dollar and receive back 77 cents though Texan taxpayers receive closer to 92 cents on their dollar). If Governor Schwarzenegger were to use his friendships and political capital in Washington to collect just 10% of federal funds due Californians, we would have nearly $5 billion of new revenue. Unfortunately, there is virtually no new federal money in the governor’s new budget.

So rather than admit the state has a revenue problem, the governor proposes that we increase our debt load and put it on our children’s credit card. Rather than do what is necessary to identify and collect new revenue, the governor proposes taxing the elderly, the disabled and the poor by limiting their access to life sustaining state services and continuing to starve our under funded and failing public school system. He sees no problem with taxing middle class families by continuing to raise the cost of higher education.

Could it be that by reasonably balancing the 2005-06 budget with a combination of cuts and new revenue without borrowing, the governor would have no substantive arguments for a special election this year? Is it possible that without exacerbating our fiscal crisis the governor would have a more difficult time convincing voters that the cause of our problems is the teachers and our public employees? There must be some explanation as to why the governor would break his promises, go back on his word and not recognize that there are more sensible and politically feasible ways to return our Golden State to sound fiscal health.